By Jonathan Stempel
NEW YORK, March 9 (Reuters) – A federal judge ruled on Monday that JPMorgan Chase employees may pursue part of their lawsuit accusing the largest U.S. bank of mismanaging its health and prescription benefits program, causing them to overpay for prescription drugs and premiums.
U.S. District Judge Jennifer Rochon in Manhattan said employees can try to prove that JPMorgan allowed repeated, unauthorized excessive payments to CVS Caremark, to benefit the pharmacy benefits manager and avoid “blowback” from healthcare clients.
The proposed class action on behalf of tens of thousands of employees accused JPMorgan of violating the Employee Retirement Income Security Act of 1974 (ERISA) by using a “fundamentally flawed” process to hire CVS Caremark, whose parent CVS Health is an investment banking client.
It also said JPMorgan knew of potential areas to cut costs, reflecting Chief Executive Jamie Dimon’s involvement with Amazon.com’s Jeff Bezos and Berkshire Hathaway’s Warren Buffett in trying to improve employee healthcare. Their unsuccessful joint venture Haven shut down in 2021.
Lawyers for the employees did not immediately respond to requests for comment. JPMorgan and its lawyers did not immediately respond to similar requests.
According to the complaint, JPMorgan let CVS Caremark mark up prices of 366 generic drugs by an average 211%, causing some employees to pay more than uninsured patients.
One drug, the multiple sclerosis medication teriflunomide, was marked up more than 38,000% to $6,229.23 from $16.20 for a 30-unit prescription, the complaint said.
In her 34-page decision, Rochon dismissed claims that JPMorgan breached fiduciary duties of loyalty and prudence, saying “decisions about joint ventures, corporate strategy, or relationships with third parties do not become fiduciary acts merely because defendants also sponsor an ERISA plan.”
She also said the bank may have ample defenses to the surviving claims following a U.S. Supreme Court decision last April that said ERISA plaintiffs need only plausibly allege that defendants engaged in “prohibited transactions.” Defendants may raise possible exemptions as an affirmative defense.
(Reporting by Jonathan Stempel in New York; Editing by Mark Porter)
